People well-placed to buy but confidence is missing

By Terry Ryder, 16th November 2011

Australians remain generally reluctant to buy property but are well-positioned to act when confidence returns.

There are signals of improving activity – such as six consecutive months of rising home loans and increased loan inquiry from first-home buyers and investors – but a consumer sentiment survey has found ongoing hesitance to get back into the market.

The Commonwealth Bank/Mortgage & Finance Association of Australia Home Finance Index for September has found that consumers’ savings are soaring and their mortgage stress is very low.b26% of home owners are putting away at least 20% of their take-home earnings, up from 22% in January.

Mortgage stress is also down. In September 78% of mortgagees said they were easily making repayments, up significantly from the May Index (68%). Those struggling to meet repayments has decreased from 26% in May to 17% in September. Western Australia is the least mortgage stressed, with 85% saying they easily meet payments.

But the survey found that the ratio of respondents planning to buy property in the next 12 months had fallen to 17%, down from 19% in May and 22% in January.

It should be noted that the survey, in September, pre-dated positive data about real estate from the ABS and from mortgage brokers, who report a big increase in loans inquiry from investors and first-time buyers. It also pre-dated the Melbourne Cup day interest rate cut, passed on in full by all major lenders except the NAB.

Chief executive of the Mortgage & Finance Association of Australia, Phil Naylor, says consumes have put themselves in a position to act when confidence returns.

"With a recent interest rate cut, high savings and low mortgage stress, prospective home buyers are in a relatively good position," he says. "Reticence about buying property seems linked to the perceived state of the economy, not to the personal financial state of consumers."

Commonwealth Bank's executive general manager mobile and third party banking, Kathy Cummings, says while some home buyers are holding back they are financially healthy. "Consumers lack confidence, but high savings means they're probably waiting for the right time to buy,” she says.

ENDS

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